Revenue from operations = 4,00,000, Average Inventory = 55,000 Gross Profit Ratio = 10%. Calculate inventory turnover ratio-
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 6.55 Times
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Revenue from Operations = ₹4,00,000
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Average Inventory = ₹55,000
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Gross Profit Ratio = 10%
Gross Profit Ratio= [Gross Profit/ Revenue from Operations] * 100
Gross Profit=10% of 4,00,000=40,000
COGS=Revenue from Operations−Gross Profit
COGS=4,00,000−40,000=3,60,000
Inventory Turnover Ratio = COGS/ Average Inventory
= 3,60,000/55,000 = 6.55 Times